Question

How do you find the interest?
You made a purchase with your credit card for $679. You can pay off up to $305 each month. If the APR on this card is 28.23%, how much total interest will you pay on the purchase? Round the solution to the nearest cent.

Answer 1

Any way you slice it, it's only a couple of payments. Just do the leg work.

Charge: 679.00
Month 1: 679.00*(1 + 0.2823/12) - 305 = Balance
Month 2: You tell me!

Answer 2

Are you sure that you have to add a one to the APR/12?

Answer 3

because then the balance for month is a negative number..

Answer 4

month 1

Answer 5

The balance is not negative.
The "1 +" is required. It represents the accumulation of the debt, not just the interest.
Please demonstrate how you can manage a negative value at Month #1.

1 + 0.2823/12 = 1.023525

Answer 6

okay, I guess it is not negative... sorry

Answer 7

Your verbal description does not answer the question.

679.00*(1 + 0.2823/12) - 305 = Balance

679.00*(1.023525) - 305 = Balance

694.97 - 305 = Balance

389.97 = Balance

I don't see a negative balance.

Answer 8

you are right..

Answer 9

Okay, now do the second month:

Month 2: 389.97*(1 + 0.2823/12) - 305 = Balance2

Answer 10

month 2 = 94.14

Answer 11

Perfect. One more time and we'll have the answer. Don't pay the whole $305.

Answer 12

is it $96.35?

Answer 13

94.14 X (.2823/12) = 96.35

Answer 14

Right on!

Original Cost: 679.00
Total Paid: 305.00 + 305.00 + 96.35 = 706.35
How much interest was paid?

Answer 15

$27.35 , okay that was the right answer. Thanks so much for explaining it to me!

Answer 16

And you wanted to calculate the interest directly! Not always the best choice. Sometime it is.

Good work.